USD/JPY Outlook December 5-9

Dollar/yen edged up for a second week in a row. Core Machinery Orders and final GDP are the highlight of this week. Here’s an outlook for the Japanese events and an updated technical analysis for USD/JPY.

Last week some encouraging figures were released with a 1.9% gain in Retail sales above the 0.7% increase expected and 2.4% gain in Prelim Industrial Production. Well above the 1.1% rise predicted furthermore Average Cash Earnings increased by 0.1% while expected to remain flat. Will this positive trend continue?

USD/JPY daily chart with support and resistance lines on it. Click to enlarge:

Leading Indicators: Wednesday, 5:00. Leading indicators dropped 2.2 points to91.6 in September contrary to predictions of a 96.3 reading. The main causes for this decline are the strong yen and global financial uncertainty. An increase to 91.8 is expected.

Core Machinery Orders: Wednesday, 23:50. Core machine orders plunged 8.2% in September following 11.0% gain in the previous month indicating a setback inJapan’s recovery. The total number of machine orders in the fourth quarter is expected to increase by 4.8% while core machine orders are predicted to decline by 3.8%. A rise of 0.8% is forecasted now.

Economy Watchers Sentiment: Thursday, 5:00.Japan’s service sector sentiment index increased to45.9 in October after45.3 in September but lower than the 46.7 expected. This is the first rise in three months and a sign of improvement although the outlook index, indicating the level of confidence in future conditions, dropped to 45.9 from 46.4 the previous month. A climb to 47.1 is expected in the service sector sentiment.

BSI Manufacturing Index: Thursday, 23:50. Big Japanese manufacturers regained their optimism about conditions in the third quarter with a reading of 10.3 following minus23.3 in April-June quarter. Economists expected a higher score of 11.4. A rise to 11.4 is again predicted.

Final GDP: Thursday, 23:50.Japan’s economy contracted in the second quarter due to the strong yen andEurope’s sovereign debt dropping 0.5% in line with expectations. In light of the reduced overseas demand the BOJ will have to ease its monetary policy further to bail out from recession. A smaller figure of 1.2% is forecasted.

* All times are GMT

USD/JPY Technical Analysis

Dollar/yen opened with a gap to lower ground, but bounced off the 77.50 line (mentioned last week) before rising and hitting 78.28. It then remained in this range and closed just under 78.

Technical lines from top to bottom

80.25 was a swing low in June and a peak in July. The round figure of 80, which provided strong support, is the next line, and it is of high importance.

79.50, is the next line of resistance. This is the line that was reached after the recent intervention. 78.30 capped a second recovery attempt in November, after the intervention and had an important role earlier as well, working as support.

77.50 is now weaker once again, although it is still of importance after capping fresh attempts to move higher once again during October. It turned into support after the intervention and assumes this role once again. The round number of 77, remains a significant cap for the range trading that characterizes the pair and proved to be stronger now.

76.75 follows closely after providing strong support of late. Further below we have the swing record low of 76.25 which is still of importance after working well as resistance.

A previous low of 75.95 is minor support. The last record low of 75.57 where the BOJ intervened is the final frontier in charted territory for now.

Below, the round number of 75 is the next potential cushion and an area where the Japanese authorities will be keen to intervene.

I am bullish on USD/JPY.

As the US economy continues showing positive signs, the dollar is becoming a senior safe haven currency in comparison to the Japanese yen. Also the Japanese trade deficit weighs on the currency.

Further reading:

For a broad view of all the week’s major events worldwide, read the USD outlook.

2 Comments

Top Brokers

About ForexCrunch

rex Crunch is a site all about the foreign exchange market, which consists of news, opinions, daily and weekly forex analysis, technical analysis, tutorials, basics of the forex market, forex software posts, insights about the forex industry and whatever is related to Forex.

Disclaimer

Foreign exchange (Forex) trading carries a high level of risk and may not be suitable for all investors. The risk grows as the leverage is higher. Investment objectives, risk appetite and the trader's level of experience should be carefully weighed before entering the Forex market. There is always a possibility of losing some or all of your initial investment / deposit, so you should not invest money which you cannot afford to lose. The high risk that is involved with currency trading must be known to you. Please ask for advice from an independent financial advisor before entering this market. Any comments made on Forex Crunch or on other sites that have received permission to republish the content originating on Forex Crunch reflect the opinions of the individual authors and do not necessarily represent the opinions of any of Forex Crunch's authorized authors. Forex Crunch has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: Omissions and errors may occur. Any news, analysis, opinion, price quote or any other information contained on Forex Crunch and permitted re-published content should be taken as general market commentary. This is by no means investment advice. Forex Crunch will not accept liability for any damage, loss, including without limitation to, any profit or loss, which may either arise directly or indirectly from use of such information.